Short Notes on Interim Budget 2024

Please wait 0 seconds...
Scroll Down and click on Go to Link for destination
Congrats! Link is Generated

Budget – 47.6 lakh crore or 47.6 trillion – 14% of GDP projected in FY25 (330 lakh crore)

Total expenditure in BE 2024-23 

Revenue Expenditure in BE 2024-25 – 36 lakh crore 

Grants in Aid for creation of capital assets – 3.9 lakh crore

Interest payments – 12 lakh crore 

25% of total expenditure, 33% of revenue expenditure and 40% of revenue receipts 

Capital expenditure in BE 2024-25 – 11.11 lakh crore – 23% of total expenditure – 3.45% of GDP

Capex has increased by 16.9% over RE 2023-24 and 11% over BE 2023-24 (10 lakh crore)

Capex - increased from 1.5% of GDP in 2017-18 to 3.45% of GDP in 2024-25 – Capex trebled in last 4 years

Effective Capital Expenditure in BE 2024-25 – 15 lakh crore

Capital Expenditure + Grants in Aid to states for creation of capital assets 

Total receipts in BE 2024-25 

Revenue Receipts in BE 2024-25 – 30 lakh crore

Net Tax Revenue – 26 lakh crore

Non Tax Revenue – 4 lakh crore - Include interest receipts, dividends and profits, grants

Capital Receipts in in BE 2024-25 – 17.6 lakh crore 

Borrowings and Other liabilities or Debt Receipts or Fiscal Deficit – 17 lakh crore – 5.1% of GDP

Deficits

Fiscal deficit – 17 lakh crore – 5.1% of GDP

FD is reduced from 9.2% in FY21, 5.9% in BE FY24 and 5.8% in RE FY24 

Revenue Deficit – 6.5 lakh crore – 2% of GDP

RD is reduced from 7.3% in FY21, 2.9% in BE FY24 and 2.8% in RE FY24

Effective Revenue deficit – 2.6 lakh crore – 0.8% of GDP

Primary deficit – 5 lakh crore – 1.5% of GDP

PD is reduced from 5% in FY21

Rupee comes from

Borrowings and other liabilities – 28%

Income Tax – 19%

Goods and Service Tax – 18%

Corporation Tax – 17%

Non Tax Revenue – 7%

Union Excise Duties – 5%

Customs – 4%

Non Debt Capital Receipts – 1%

Rupee goes to

Interest Payments (20%)

States' share of Taxes and Duties (20%)

Central Sector Schemes (16%)

Finance Commission and other transfers (8%)

Centrally Sponsored Schemes (8%)

Defence – 8% - 1.5% of total GDP

Subsidies – 6% (Food Subsidy – 4% and Fertilizer subsidy – 2.5%)

Pensions – 4%

Allocation for Specific Ministries

Ministry of Defence>Ministry of Road Transport and Highways>Ministry of Railways>Ministry of Consumer Affairs, Food and Public Distribution>Ministry of Home Affairs

My calculation

Agriculture and allied – 3% of total budget

Education – 2.6%

Health – 1.8% 

MGNREGA – 1.8% from 2.5% in pre COVID era

Tax receipts 

Gross Tax revenue – 38 lakh crore – 11.7% of GDP – highest in 15 years

Income Tax – 11.5 lakh crore - 19% of total receipts

GST – 10.67 lakh crore – includes only CGST, IGST and GST Compensation Cess – 18% of total receipts

Corporation Tax – 10 lakh crore – 17% of total receipts

Union Excise Duties – 3 lakh crore

Customs – 2 lakh crore

Direct Tax (6.7% of GDP) is higher than Indirect tax (5% of GDP)

Net Tax receipts – 26 lakh crore

Net Tax Receipts = Gross Tax Revenue – State Share of Taxes (12 lakh crore)

State share of Taxes = 41% of (Gross Tax Revenue minus GST) – 15th Finance Commission recommendation 

Tax to GDP ratios

Central Tax to GDP – 11.7% and State Tax to GDP – 5%

Combined Centre and State Tax to GDP – 16.7%

Direct Tax – tax impact and tax incidence are same

Indirect Tax – Tax impact (on producer) and tax incidence (on consumer)

Union Excise Duty

type of indirect tax on goods manufactured in India. It's a production tax that's imposed on manufactured items in India that are meant for domestic consumption

not payable on the goods exported from India

Imposed in addition to an indirect tax such as goods & services tax (GST), sales tax or value-added tax (VAT)

Excise duty is the opposite of Customs duty in that it applies to items created domestically in India, whereas Customs applies to goods imported from outside the nation

The difference between excise duty and other indirect taxes is that excise duty is levied on the manufacture of goods and at the time of removal of goods from the factory, while GST or sales tax or VAT are levied on the supply of goods and services.

Budget 2024

Not populist and only vote on account

2019 - PM KISAN scheme and tax liability of individuals below 5 lakh (up from 3.5 lakh) income was waived off 

Fiscal prudence, consolidation, conservatism, rectitude and discipline; Opposite – Fiscal profligacy

Fiscal deficit of FY24 – 5.8% lesser than 5.9% target; from 6.4% in FY23

Fiscal deficit of FY25 – 5.1% with target of 4.5% by FY26

Signals government’s vision of macroeconomic stability – lower than even the lower end of the range of economist projections of 5.2% to 5.5%

Marks unwinding of fiscal expansion driven by pandemic due to reluctance from household and private firms

Modern Day Keynesianism – government should step in when household and private firms are not willing to spend 

At the same time government has also focused on crucial safety nets like PM Garib Kalyan Yojana 

Assumptions – tax buoyancy, cut in fertilizer subsidy, food subsidy, projected increase in tax rates

Revenue deficit of FY24 – 2.8% (RE) lesser than 2.9% (BE); Revenue Deficit of FY25 – 2%

Primary deficit of FY25 – 1.5%

Significance of less fiscal deficit

Indian economy’s normal growth trajectory has returned that government feels less pressure to borrow and stimulate or provide extraordinary support to those worst impacted by pandemic induced disruptions

Impetus to growth is expected henceforth to come from private sector

Will release more resources for private corporates to invest 

Macroeconomic stability – fiscal deficit, current account balance, balance sheets – will be conducive for revival of private investment

Counter cyclical fiscal policy 

Creating fiscal space when growth recovers – meaningful fiscal consolidation is need of the hour

US fiscal deficit widened by a staggering 4% of GDP in 2023 even as Fed was crumbling to control inflation – fiscal and monetary policies against each other – fiscal policy being counter productive 

Government wants private sector to fund country’s capex growth by facilitating larger availability of credit to private sector 

Inflation is because of the stimulus that stayed too long as happened in India in 2010-2011-12

Government should also rebuild fiscal space which might be needed at some time in future 

Private investment not picking up 

Finance Minister said Hanuman hesitating to fly – without that there can be no sustained formal job creation leading to higher incomes and consumption

Capex

Year on year growth in capex – 11% will be faster than growth in overall spending – 6%

Drastic reduction in growth of capex – from an average year on year growth rate of 30% or more over the last three years, capex for FY25 will grow by only 16.9% compared to RE of FY24

Capex for FY24 was increased by 33% over BE 2022-23

State capex has grown by 50% in FY24

Measures to follow while reducing deficits while not affecting growth

Revenue based consolidation - Achieve consolidation by raising revenues rather than compressing expenditures – because expenditure multipliers are higher than revenue multipliers

Asset sales – because it is the least growth impinging manner of reducing deficit 

Reasons for increase in indirect and direct taxes in FY24

Boom in service sector exports

Increased incomes of individuals associated with GCC and consulting services – thus expanding income tax base and giving a boost to direct tax revenues

Hike in indirect tax because high income earners spend more on items with higher GST rates

Decline in commodity prices

Led to expansion of corporate rate margins, boosting profits and corporate income tax revenues 

But these are temporary and may not continue in FY25

Measures to reduce debt to GDP ratio

Fiscal deficit ratio must fall to slow down growth in government debt

But if it is brought down too rapidly, it hurts GDP growth 

Denominator effect – boost nominal GDP growth rate (more from output than inflation)

Statements by FM

Comprehensive GDP of Governance, Development and Performance 

Decade 2014-24 - decade of transformative growth

Government’s commitment to high quality spending – capex trebled in last 4 years

Policies aiming youth, poor, women and farmers 

Transition from age old jurisdiction based assessment system to faceless assessment and appeal

Support to start up – PM Mudra, Start up Credit Guarantee, Start up India 

Rationalization of fertilizer subsidies - After adoption of Nano Urea, Nano DAP 

15 newly constructed AIIMS

Upgradation of Anganwadi centres under Saksham Anganwadi and Poshan 2.0

From outlay to output to outcome budget 

New announcements

Promoting investment 

Capex outlay – increased by 11% to 11.11 lakh crore – 3.45% of GDP and 23% of total expenditure (highest in 3 decades) - Government’s capex has trebled in last 4 years

Interest free 50 year capex loans to states – 1.3 lakh crore

Economic infrastructure - railways

Three major economic corridor programmes for Railway - Energy Economic Corridor (energy, cement and mineral); Port connectivity corridor or Rail Sagar; High traffic density corridors or Amrit Chaturbhuj

Upgrading 40,000 regular bogies into Vande Bharat standards 

Research

A new scheme to strengthen deep tech capabilities in defence

Corpus of 1 lakh crore with interest free loans for private sector to invest in R&D in sunrise sectors

Housing

Scheme to enable deserving urban middle class to buy or build their own homes – from chawls, slums or unauthorized colonies

2 crore more rural houses in next 5 years under PMAY (Gramin) – already 2.5 crore out of 3 crore target homes 

boost to real estate sector in rural areas – boost consumption growth and women empowerment 

Green growth

300 units of free power a month for one crore households through roof top solar panels

benefits of 15,000 to 18,000 rupee annually by saving and selling surplus

Viability gap funding to support capital intensive offshore wind sector of up to 1GW capacity

Boost to EV ecosystem

Encouragement of payment security mechanism for adoption of e buses for public transport networks 

Government’s focus on Metro Rail and Namo Bharat (with Vande Bharat and Amrit Bharat)

One lakh crore corpus for R&D can also boost EV ecosystem with innovations

New scheme of biomanufacturing and bio-foundry to provide environmental friendly alternatives such as biodegradable polymers, bio plastics, bio pharma, bio agri inputs – bio economy

Ease of doing business

Withdraw small, non reconciled and disputed direct tax demands of up to 25000 till FY10 and up to 10,000 for FY11 to FY15 – ease of living and doing business – benefitting 1 crore tax payers

Extension of tax benefits for start ups and investments made by sovereign wealth or pension funds and tax exemption on certain income of some International Financial Services Centre (IFSC) units by one year

Health 

Health cover under Ayushman Bharat PM JAY extended to Accredited Social Health Activists and Anganwadi workers

U WIN platform for managing immunization and efforts of Mission Indradhanush

HPV vaccination for girls in 9 to 14 years age group for prevention of cervical cancer

Women 

Target of Lakhpati Didi – from 2 crore to 3 crore - Training of SHGs to have sustainable income of 1 lakh per annum – already 1 crore Lakhpati Didis

High power committee to consider challenges arising from fast population growth and demographic changes 

Increase in budgetary allocation for Department of Fisheries, Animal Husbandry and Dairying

Four castes

Women – Lakhpati Didis, cervical cancer, Ayushman Bharat extension 

Poor – 2 crore housing under PMAY (G), new scheme for urban poor

Youth – 1 lakh crore corpus for R&D; deep tech in defence

Farmer – scheme for biomanufacturing (bioeconomy); increased allocation to allied sectors

Issues in budget

Big drop in fertilizer subsidies – especially when sea lanes in Red Sea are under attacks by Houthis

MGNREGA – 86000 crore for FY25 – hike by 26000 crore from BE FY24 i.e., 60000 crore

Centre has halted payments to West Bengal for 2 years – owing 7000 crore

5.6 crore households are registered under the programme – thus would provide only for 25 to 30 days

To meet employment needs of registered households, 3 lakh crore is essential 

Additionally 15 to 20% of budget is spent on clearing past dues; Centre will have to clear dues to WB

60% cut in budget in UDAN

Modest capex growth – 11% compared to 33% last year – with skepticism over the revival of private investment cycle

Government’s counter cyclical fiscal policy might have the threat of undermining rising economic momentum

Slow down in capex spending of PSEs – as ratio to GDP, capex spending is moderated to 1% in FY25, lowest in recent times

Allocations for health and family welfare, agriculture, rural development, education have only seen marginal increases

Still long way for FD of 3% mandated by FRBM act

Agriculture

Modest growth in agriculture GDO as per first advance estimate - 1.8% - dip from 4% last year

Ministry of Fisheries, Animal Husbandry and Dairying witnessed 27% increase

Urgent need to manage foot and mouth disease, reduce methane emissions

Department of Agriculture and Farmers Welfare – slight uptick of 0.6% 

Department of Agricultural Research and Education (DARE) and Department of Agriculture and Farmers Welfare together accounted for just 2.7% of total budget expenditure 

Need to rationalize food subsidy as done in TPDS

In TPDS, wheat and rice were given free to only the Antodaya category of consumers, but charged 50% of MSP to BPL and 90% of MSP to APL

Saved funds can be used in micro irrigation – to boost productivity and enhance resilience against climate change

Need to minimize diversion of fertilizers to non agricultural sectors 

About 20-25% of urea is diverted as per experts 

Solution is to shift from subsiding the price of urea to directly empowering farmers through direct cash transfers – this will enable farmers to purchase fertilizers at market prices while reducing leakages 

Distress in agriculture

Strong downward pull on agricultural prices squeezing agricultural incomes

Stagnation or fall of agricultural prices was not compensated by rise in MSP 

Sharp rise in cost of inputs in agriculture, particularly fertilizers

Fall in real wages of agricultural and non agricultural rural labourers

Rise in female labour force participation ratio is by increase in women’s participation in unpaid family labour in agriculture

Public investment in agriculture in general and as well as agricultural research and innovation has been stagnant 

Rural distress

Sagging rural economy with subdued demand

As per rural wages data from labour bureau, in last 5 years, agriultual wages in real terms have grown at only 0.2% per annum and non farm wages have declined at 0.9% per annum

Reversal of structural transformation in workforce after 2017-18

Increase in female employment is an increase in self employment worsening employment quality and declining earnings

Employment in agriculture has increased at a faster pace after 2017-18 – due to unemployment elsewhere

Thus resulting in declining cultivation income per worker

Sluggish consumption in rural areas 

Way forward

To raise expenditure on investment in agriculture – to promote climate resilience 

Effects of fiscal deficit

High borrowing costs with higher fiscal deficit as a percentage of GDP

Contractionary monetary stance by RBI – thus increasing borrowing costs of government post pandemic 

Higher fiscal deficit leads to higher inflation

lower fiscal deficit may thus help improve the ratings assigned to the Indian government’s bonds

adversely affect the ability of the government to manage its overall public debt – IMF projection

lower fiscal deficit may help the government to more easily sell its bonds overseas and access cheaper credit – tapping into international market 

إرسال تعليق

Oops!
It seems there is something wrong with your internet connection. Please connect to the internet and start browsing again.
AdBlock Detected!
We have detected that you are using adblocking plugin in your browser.
The revenue we earn by the advertisements is used to manage this website, we request you to whitelist our website in your adblocking plugin.
Site is Blocked
Sorry! This site is not available in your country.